Facts about RFID tags don't add up to Big Brother

Ever since Walmart announced it would be attaching RFID tags (radio-frequency ID tags) to certain apparel items, there's been quite a bit of confusion about what these devices can do, or how the devices might violate shoppers' privacy. Will these little radio frequency tags really let Walmart track you outside the store, compile data about your shopping habits, or let thieves know what's inside your home?

Not according to the retail technology experts we've spoken with.

In case you're late to the story, Walmart plans to use RFID tags in some apparel, namely jeans and underwear. The tags transmit information about the product, much like a bar or UPC code, except in this case they're called electronic product codes, or EPCs. It's just a lot more detailed data than price and product number. Retailers have been developing and implementing the technology for years, and using it to great success to help streamline the supply chain and control inventory.

RFID tags attached to pallets of products let everyone involved track a shipment. The technology tells not just where the delivery is, much like a tracking number on a package, but records things like whether that pallet was left out in the elements for any length of time. It helps reduce damaged goods and in theory, elevates the user's ability to protect against spoiled or dangerous merchandise. RFID is a growing tool that retailers and product manufacturers use to operate more efficiently and lower costs.

But RFID hasn't been used in individual products, until now.

Leave it to Walmart to break new technological ground and freak everyone out in the process. Let us pause for a moment and separate some fact from fiction.

Fact
The information on RFID tags can only be read by a compatible reader close by, as they can only transmit information about 8 feet. And it's in a code. Anyone trying to use a reader not programmed for Walmart won't get anything.

Fact
Yes, the tags will continue to transmit after the item leaves the store, but not for long. RFID tags operate on a battery and batteries die.

Fact
RFID doesn't add any costs to a purchase, certainly not any that is being passed along to customers. The average cost of a tag is just 7 cents, less if purchased in bulk as Walmart is likely doing.

Fact
No one is likely to troll the streets getting signals from your purchases. As great as RFID technology promises to be, it's not infallible or foolproof. Getting information off the tags isn't always easy and things like water and metal interfere with the signal. So any claims that someone riding around with a scanner getting information from tags sitting in garbage cans seems pretty far-fetched. At the very least, those bins need to be plastic, located in an arid climate, and with no liquid in the same container. Even then, the only information a thief would get was the item number.

It would be a lot easier and a lot more efficient to dig through that trash and find the UPC code on a receipt than steal a scanner or hack into Walmart's database and drive around looking for perfect conditions.

RFID promises quite a few benefits for retailers and consumers.

"Right now it's really about in-store management and keeping the product in stock," Bill Hardgrave, incoming dean of the College of Business at Auburn University, said in a phone interview. "They are using it to enhance the shopping experience."

In the future, RFID will let us pay for items without waiting in a checkout line, says Hardgrave -- all the tagged items in a cart can be read at the exit and your account charged. Stuck in the dressing room with the wrong size? A terminal or hand-held device in the room could locate the correct size or color, and request it be brought to you.

These are future uses, but today, stores like Walmart are using RFID to reduce the costs of doing business. Walmart's claims that it helps reduce the cost of employee theft have merit. Back room disappearing acts will be harder to pull off. And while RFID tags won't deter shoplifters, it will better help detect what items leave the store, helping Walmart better manage inventory levels and implement more meaningful ways to deter thieves in specific product categories.

And here's something to be happy about: The technology helps retailers do things like keep better track of inventory. "Have you ever gone into a store and couldn't find something, and people working there were clueless? RFID tags will actually find the item," explains Bill Schover, editorial director at the In-Store Marketing Institute in an interview. "What's not to like?"

Conspiracy theorists and privacy advocates have concerns that Walmart will use RFID to track people, especially since some states have begun putting smart chips on driver's licenses. As mentioned in a Wall Street Journal article (subscription required),some fear that purchase history could be paired with a personal electronic ID, creating a profile for each shopper for marketing purposes.

"You can't deny the possibility that your whole shopping history is on that tag, but it seems a little far fetched," says Schover. "But there are opinions, there are points of view, and then there are facts. It's not so much the retailers that know about you, it's the independent research companies."

"Walmart probably knows less about people's shopping and purchase behavior than those retailers that have loyalty programs," points out Mike Troy, editor of Retailing Today, a retail industry resource. "Programs that you are choosing to participate in." Walmart has no such program.

Airlines, credit cards, grocery stores or other retailers all collect data from loyalty club members. Opting in may bring deals, but you also relinquish some privacy. If you really want to remain anonymous, pay cash, don't join any clubs and stop worrying about the tag in your underwear.